Correlation Between Swatch Group and Implenia

Can any of the company-specific risk be diversified away by investing in both Swatch Group and Implenia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Swatch Group and Implenia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Swatch Group AG and Implenia AG, you can compare the effects of market volatilities on Swatch Group and Implenia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Swatch Group with a short position of Implenia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Implenia.

Diversification Opportunities for Swatch Group and Implenia

0.53

Correlation Coefficient

Swatch Group  Implenia

Very weak diversification

The 3 months correlation between Swatch and Implenia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Implenia AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Implenia AG and Swatch Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Swatch Group AG are associated (or correlated) with Implenia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Implenia AG has no effect on the direction of Swatch Group i.e., Swatch Group and Implenia go up and down completely randomly.

Pair Corralation between Swatch Group and Implenia

Assuming the 90 days trading horizon Swatch Group AG is expected to under-perform the Implenia. But the stock apears to be less risky and, when comparing its historical volatility, Swatch Group AG is 1.4 times less risky than Implenia. The stock trades about -0.1 of its potential returns per unit of risk. The Implenia AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,930  in Implenia AG on September 17, 2024 and sell it today you would earn a total of  120.00  from holding Implenia AG or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Swatch Group AG  vs.  Implenia AG

Swatch Group AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swatch Group AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swatch Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Implenia AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Implenia AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Implenia is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Swatch Group and Implenia

The main advantage of trading using opposite Swatch Group and Implenia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group position performs unexpectedly, Implenia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Implenia will offset losses from the drop in Implenia's long position.

The idea behind Swatch Group AG and Implenia AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.